FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
Commission File Number 1-1657
CRANE CO.
(Exact name of registrant as specified in its charter)
Delaware 13-1952290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 First Stamford Place, Stamford, CT. 06902
(Address of principal executive office) (Zip Code)
(203) 363-7300
(Registrant's telephone number, including area code)
(Not Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's classes of common
stock, as of April 30, 1998:
Common stock, $1.00 Par Value - 45,729,288 shares
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Crane Co. and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net Sales $ 526,817 $ 467,333
Operating Costs and Expenses:
Cost of sales 379,989 338,160
Selling, general and
administrative 80,172 74,814
Depreciation & amortization 14,281 13,364
474,442 426,338
Operating Profit 52,375 40,995
Other Income (Expense):
Interest income 542 692
Interest expense (5,940) (5,957)
Miscellaneous - net (77) 16
(5,475) (5,249)
Income Before Taxes 46,900 35,746
Provision for Income Taxes 17,001 13,101
Net Income $ 29,899 $ 22,645
Net Income Per Share:
Basic $.66 $.50
Diluted $.65 $.49
Average Basic Shares Outstanding 45,591 45,578
Average Diluted Shares Outstanding 46,205 46,038
Dividends Per Share $.125 $.125
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
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<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Crane Co. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net Income $ 29,899 $ 22,645
Other comprehensive income, net of tax-
Foreign currency translation adjustments 108 (4,177)
Comprehensive Income $ 30,007 $
18,468
<FN>
See Notes to Consolidated Financial Statements
-3-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
Crane Co. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
<CAPTION>
March 31, December 31,
1998 1997 1997
(Unaudited)
Assets
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 48,908 $ 3,578 $
6,982
Accounts receivable 250,294
286,807 272,262
Inventories
Finished goods 118,683 121,503
113,496
Finished parts and
subassemblies 49,241 37,265
46,351
Work in process 47,732 46,374
51,345
Raw materials 80,206 65,489
79,892
295,862 270,631
291,084
Other current assets 40,215 34,264
37,425
Total Current Assets 671,792 558,767
607,753
Property, Plant and Equipment:
Cost 592,296 562,406
582,704
Less accumulated depreciation 317,471 299,907
308,947
274,825 262,499
273,757
Other Assets 54,799 54,061
55,114
Intangibles 50,661 54,447
51,907
Cost in excess of net assets
acquired 218,299 216,915
220,563
$ 1,270,376 $1,146,689 $ 1,209,0
94
<FN>
See Notes to Consolidated Financial Statements
-4-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information
<CAPTION>
March 31, December 31,
1998 1997 1997
(Unaudited)
Liabilities and Shareholders' Equity
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 981 $ 1,067 $ 992
Loans payable 24,573 28,800 30,240
Accounts payable 134,728 117,123 122,616
Accrued liabilities 118,749 109,634 128,794
U.S. and foreign taxes on income 29,497 18,999 13,170
Total Current Liabilities 308,528 275,623 295,812
Long-Term Debt 281,783 266,875 260,716
Deferred Income Taxes 46,041 54,476 46,007
Other Liabilities 26,783 27,207 25,618
Accrued Postretirement Benefits 41,152 42,959 41,838
Accrued Pension Liability 6,415 6,210 6,559
Preferred Shares, Par Value $.01
Authorized - 5,000 Shares - - -
Common Shareholders' Equity:
Common shares 45,645 45,565 45,542
Capital surplus 21,368 26,577 19,951
Retained earnings 509,103 412,742 483,601
Accumulated other comprehensive (16,442) (11,545) (16,550)
Income
Total Common Shareholders' Equity 559,674 473,339 532,544
$ 1,270,376 $ 1,146,689 $ 1,209,094
<FN>
See Notes to Consolidated Financial Statements
-5-
</TABLE>
<PAGE>
<TABLE>
Part I - Financial Information (Cont'd.)
Crane Co. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Operating activities:
Net income $ 29,899 $ 22,645
Depreciation 9,505 9,085
Amortization 4,776 4,279
Deferred taxes (306) (776)
Cash used for operating working capital (4,189) (5,516)
Other 2,009 1,662
Total from operating activities 41,694 31,379
Investing activities:
Capital expenditures (10,970) (10,192)
Payments for acquisitions - (19,820)
Proceeds from disposition of capital assets 116 159
Total used for investing activities (10,854) (29,853)
Cash flows from financing activities:
Equity:
Dividends paid (5,703) (5,699)
Reacquisition of shares (418) (4,007)
Stock options exercised 1,938 803
Net Equity (4,183) (8,903)
Debt:
Proceeds from issuance of long-term debt 20,935 -
Repayments of long-term debt (14) (1,016)
Net increase in short-term debt (5,460) 707
Net Debt 15,461 (309)
Total provided from (used for) financing activities 11,278 (9,212)
Effect of exchange rate on cash and cash equivalents (192) (315)
Increase (decrease) in cash and cash equivalents 41,926 (8,001)
Cash and cash equivalents at beginning of period 6,982 11,579
Cash and cash equivalents at end of period $ 48,908 $ 3,578
Detail of Cash (Used for) Provided From
Operating Working Capital:
Accounts receivable $ (15,246) $ (18,179)
Inventories (5,097) (2,533)
Other current assets (2,602) (246)
Accounts payable 12,311 12,087
Accrued liabilities (9,891) (8,731)
U.S. and foreign taxes on income 16,336 12,086
Total $ (4,189) $ (5,516)
Supplemental disclosure of cash flow information:
Interest paid $ 5,124 $ 4,966
Income taxes paid 883 955
See Notes to Consolidated Financial Statements
-6-
</TABLE>
<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements
<TABLE>
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to
Form 10-Q and, therefore reflect all adjustments which are,
in the opinion of management, necessary for a fair statement
of the results for the interim period presented.
These interim consolidated financial statements should be
read in conjunction with the Consolidated Financial
Statements and Notes to Consolidated Financial Statements in
the company's Annual Report on Form 10-K for the year ended
December 31, 1997.
2. Sales and operating profit by segment are as follows:
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
(In thousands)
Net Sales:
Fluid Handling $ 118,041 $ 88,115
Aerospace 94,505 81,894
Engineered Materials 61,249 56,372
Crane Controls 35,002 31,753
Merchandising Systems 46,184 42,466
Wholesale Distribution 172,448 166,901
Other 3,206 2,954
Intersegment Elimination (3,818) (3,122)
Total $ 526,817 $ 467,333
Operating Profit (Loss):
Fluid Handling $ 8,952 $ 6,089
Aerospace 25,272 19,798
Engineered Materials 7,551 7,114
Crane Controls 2,982 1,929
Merchandising Systems 8,736 7,741
Wholesale Distribution 4,428 3,383
Other (383) 316
Corporate (5,200) (5,383)
Intersegment Elimination 37 8
Total $ 52,375 $ 40,995
-7-
</TABLE>
<PAGE>
Part I - Financial Information (Cont'd.)
Notes to Consolidated Financial Statements
3. Restatements
Certain prior year amounts have been reclassified to conform
with the 1998 presentation.
4. Inventories
Inventories are stated at the lower of cost or market,
principally on the last-in, first-out (LIFO) method of inventory
valuation. Replacement cost would be higher by $47.7 million at
March 31, 1998, $51.3 million at March 31, 1997, and $46.6
million at December 31, 1997.
5. Disclosure of Accumulated Other Comprehensive Income Balances
The company adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" on January 1, 1998.
Comprehensive Income is the change in equity of a business
enterprise during a period from transactions and other events
and circumstances, from non-owner sources. It includes all
changes in equity during a period except those resulting from
investments by owners and dispositions to owners. Activity for
the period is as follows:
<TABLE>
<CAPTION>
Foreign Accumulated
Currency Other
Items Comprehensive
Income
<S> <C> <C>
January 1, 1988 $(16,550) $(16,550)
Current-period change 108 108
March 31, 1998 $(16,442) $(16,442)
</TABLE>
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<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 1998 and 1997
[CAPTION]
This 10Q may contain forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. These statements
present management's expectations, beliefs, plans and objectives,
future financial performance, and assumptions or judgments concerning
such matters. Any discussions contained in this 10Q, except to the
extent that they contain historical facts, are forward-looking and
accordingly involve estimates, assumptions, judgments and
uncertainties. There are a number of factors that could cause actual
results or outcomes to differ materially from those addressed in the
forward-looking statements. Such factors are detailed in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 filed with the Securities and Exchange Commission
Results From Operations:
First Quarter of 1998 Compared to First Quarter of 1997:
Net income for the quarter ended March 31, 1998 set a first quarter
record of $29.9 million, or $.65 per diluted share outstanding, a
32% increase from $22.6 million or $.49 per diluted share reported
for the same period last year. Operating profit for the first
quarter increased 28% to $52.4 million on a sales increase of 13% to
$526.8 million. Operating margins for the quarter improved a full
percentage point to 9.9% of sales from 8.8% in 1997. Cash flow (net
income plus depreciation and amortization) per diluted share
increased 22% for the quarter to $.96 per share.
Fluid Handling sales increased 34% in the quarter to $118.0 million,
up $29.9 million from the prior year. The acquisitions of MOVATS
and Stockham Valves in 1997 contributed $23.7 million to the
increase. In addition, cast steel and quarter turn valve shipments
increased 27% and 26%, respectively. Operating profit increased 47%
to $9.0 million. Acquisitions contributed $2.3 million of the $2.9
million increase in operating profit. Operating profit margins
improved to 7.6% of sales compared to 6.9% in 1997. Margins
improved for engineered valves and pumps but were down slightly for
commercial valves due to costs associated with integrating the
Stockham iron and bronze production into Crane facilities.
Aerospace sales increased 15% or $12.6 million in the quarter with
all businesses continuing to benefit from the strength of the
airline industry. Operating profit increased 28% with Hydro-Aire
and ELDEC benefiting from higher aircraft production levels and
airline utilization rates. Operating margins improved to 26.7%
compared to 24.2% in the first quarter of 1997. Order backlog
continued to increase and totaled $311 million at March 31, 1998, an
increase of $14 million from year-end 1997 and up $37 million from
the prior year.
-9-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 1998 and 1997
Engineered Materials sales and operating profit were up 9% and 6%,
respectively. Results in this segment were mixed. Kemlite and Cor
Tec shipments were both up over 20% with a corresponding improvement
in operating profit from the prior year level as both businesses
continued to benefit from their strong market position and strong
demand from the truck trailer manufacturers, and from Kemlite's
leadership position in the strong recreational vehicle market. This
was somewhat offset by lower project business at Resistoflex in the
United States and Southeast Asia where shipments were down 21% from
the 1997 level, and the January ice storm in Eastern Canada which
negatively impacted Crane Plumbing sales and production through
February. Overall operating profit margins declined to 12.3% of
sales compared to 12.6% in 1997 as margin improvement at Kemlite and
Cor Tec was more than offset by declines at Crane Plumbing and
Resistoflex.
Crane Controls sales, operating profit and operating margins
increased for the quarter, continuing the trend of the fourth
quarter of 1997. Operating profit increased 55% to $3.0 million on
a 10% increase in shipments. All business units reported higher
sales, operating profits and margins; overall operating profit
margins improved to 8.5% of sales from 6.1% in the first quarter of
1997.
Merchandising Systems operating profit was up 13% on a 9% increase
in shipments. National Vendors sales were up $6.3 million (21%) due
to higher export demand particularly in the United Kingdom, and
higher sales to the domestic distributor market, largely as a result
of the Polyvend acquisition in March 1997. This more than offset
lower shipments at NRI as a key customer in the amusement industry
delayed their orders pending the final decision regarding the
planned introduction of the European Monetary Unit (EMU) scheduled
for May 1998. Over all, operating margins improved to 18.9% of
sales compared to 18.2% in 1997.
Wholesale Distribution operating profit increased $1 million or 31% on
a 3% increase in revenues. Huttig sales were up 10% or $13.2 million
due to Huttig's acquisition of MALLCO Lumber and Building Materials
Inc. in July 1997, and Crane Supply sales were up slightly. This more
than offset the loss of revenues from the sale of Valve Systems and
Controls in the fourth quarter of 1997. Operating profit margins
improved to 2.6% of sales compared to 2% in 1997 with both Huttig and
Crane Supply improving.
-10-
<PAGE>
Part I - Financial Information (Cont'd)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 1998 and 1997
Net interest expense in the quarter was in line with the prior year.
The effective tax rate decreased to 36.3 percent in the first
quarter of 1998 compared to 36.7 percent in 1997.
Liquidity and Capital Resources:
During the three months of 1998 the company generated $41.7 million
of cash from operating activities, compared to $31.4 million in
1997.
Net debt totaled 31.6 percent of capital at March 31, 1998. The
current ratio was 2.2 with working capital totaling $363.3 million
at March 31, 1998 compared to $283.1 million at March 31, 1997. The
company had unused credit lines of $422 million at March 31, 1998.
Part II - Other Information
Item 1. Legal Proceedings
There have been no material developments in any of the legal
proceedings described in the company's Annual Report on Form 10-
K for the year ended December 31, 1997.
Item 4. Submission of Matters to a vote of Security Holders
A) The Annual Meeting of shareholders was held on April 20,
1998.
B)The following two Directors were reelected to serve for three
years until the Annual Meeting of 2001.
Mr. Richard S.Forte'
Vote for - 40,165,793
Vote withheld - 532,563
Mr. Jean Gaulin
Vote for - 40,170,711
Vote withheld - 527,645
C)The following Director was elected to serve for three years
until the Annual Meeting of 2001.
Mr. James L.L.Tullis
Vote for - 39,934,132
Vote withheld - 764,224
D)The shareholders approved the selection of Deloitte & Touche
LLP. as independent auditors for the company for 1997.
Vote for - 40,546,302
Vote against - 78,286
Abstained - 73,768
-11-
<PAGE>
+Item 4.Submission of Matters to a vote of Security Holders
E)The shareholders approved the 1998 Stock Option Plan.
Vote for - 34,200,489
Vote against - 2,201,525
Abstained - 4,296,342
F)The shareholders approved the 1998 Restricted Stock Award Plan.
Vote for - 27,403,103
Vote against - 8,946,386
Abstained - 4,348,867
G) The shareholders approved the 1998 Non-Employee Director
Restricted Stock Plan.
Vote for - 34,945,736
Vote against - 1,387,567
Abstained - 4,365,053
Item 6. Exhibits and Reports on Form 8-K
10. Material Contracts:
(iii)Compensatory Plans
There is incorporated by reference herein:
(a) The Crane Co. 1998 Stock Option Plan contained
in Exhibit 4.1 to the company's Registration
Statement No. 333-50489 on Form S-8 filed with
the Commission on April 20, 1998.
(b) The Crane Co. 1998 Restricted Stock
Award Plan contained in Exhibit 4.1 to the
company's Registration Statement No. 333-50487
on Form S-8 filed with the Commission on April
20, 1998.
(c) The Crane Co. 1998 Non-Employee Director
Restricted Stock Award Plan contained in
Exhibit 4.1 to the company's Registration
Statement No. 333-50495 on Form S-8 filed with
the Commission on April 20, 1998.
11.Computation of earnings per share for the
quarters March 31, 1998 and 1997.
27.Article 5 of Regulation S-X Financial Data Schedule
for the first quarter.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRANE CO.
REGISTRANT
Date May 11, 1998 By /s/ D.S. Smith
D.S. SMITH
Vice President-Finance
and Chief Financial Officer
Date May 11, 1998 By /s/ M.L. Raithel
M.L. RAITHEL
Controller
-13-
<PAGE>
<TABLE>
Crane Co. and Subsidiaries
Exhibit 11 to Form 10-Q
Computation of Net Income per Common Share
Three Months Ended March 31, 1998 and 1997
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Basic Net Income Per Share:
Net income $ 29,899 $ 22,645
Average basic shares outstanding 45,591 45,578
Basic Net Income per share $ .66 $ .50
Diluted - Income Per Share:
Net income $ 29,899 $ 22,645
Average basic shares outstanding 45,591 45,578
Add Diluted effect of stock options 614 460
Average diluted shares outstanding 46,205 46,038
Diluted Net Income per share $ .65 $ .49
</TABLE>
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 48,908
<SECURITIES> 0
<RECEIVABLES> 286,807
<ALLOWANCES> 0
<INVENTORY> 295,862
<CURRENT-ASSETS> 671,792
<PP&E> 592,296
<DEPRECIATION> 317,471
<TOTAL-ASSETS> 1,270,376
<CURRENT-LIABILITIES> 308,528
<BONDS> 281,783
<COMMON> 45,645
0
0
<OTHER-SE> 514,029
<TOTAL-LIABILITY-AND-EQUITY> 1,270,376
<SALES> 526,817
<TOTAL-REVENUES> 526,817
<CGS> 379,989
<TOTAL-COSTS> 474,442
<OTHER-EXPENSES> (77)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,398
<INCOME-PRETAX> 46,900
<INCOME-TAX> 17,001
<INCOME-CONTINUING> 29,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,899
<EPS-PRIMARY> .66
<EPS-DILUTED> .65
</TABLE>
